CSRHub Blog Research on ESG metrics and comments on sustainability best practice

Last month, the US Energy Information Agency (EIA) reported that for the first three months of 2012, CO2 emissions fell to about 1992 levels, primarily because coal companies switched to natural gas.

Another boost for natural gas? Certainly EIA’s press release spins it that way. It seems that if we just switch coal to natural gas, we’ll reduce the environmental problem without changing behavior at all.

The article claimed the extraordinary Q1 coal emissions drop of 18% over last year’s Q1 was due primarily to natural gas prices dropping to about half the price of coal. Utilities could justify switching from coal to natural gas much faster than anyone had thought possible.

[csrhubwidget company="Atlas-Energy-Inc" size="650x100"]

Click “Oil and Gas Extraction” in the CSRHub Sustainability Ratings widget above to see all the companies and their ratings in this industry.

But the numbers just didn’t feel right. And when I looked into what’s behind the EIA data, I got a muddled story.

First, was Q1 an average quarter? No, there were dramatic anomalies. Temperatures for the first quarter were not just higher than expected, they were 6% higher than the average of the past hundred years. The economy was weaker than the year before, with GDP growth rates about half that of first quarter 2011. And though not included in the EIA numbers, renewable energy sources grew 14% in 2011, offsetting another piece of fossil fuel demand.

Coal generation has declined dramatically, with production down from 50% of all energy sources in 2007 to 34% this March. And gas generation has taken up the slack, climbing to be almost one-third of electricity generation due to large shale deposits now coming on line.

But the change in generation is not born out in emissions figures. The EIA press release claims, “The decline in coal-related emissions is due mainly to utilities using less coal for electricity generation as they burned more low-priced natural gas.” But a lot of that natural gas went into filling storage facilities to near capacity, not to power plants.

Even if as the EPA claims natural gas emits only half of what comes out of coal plants, you’d still expect some bounce in natural gas emissions. But natural gas emissions actually fell by 3% in the first quarter.

We know that demand dropped for the reasons cited above. Coal plants stopped production because of regulatory threats combined with competition from natural gas’ unnaturally low prices. Many other coal plants switched to natural gas.

All that slowed in Q2, when natural gas prices from generators rose 70%. Energy companies believe this price rise is here to stay. As reported by CNN’s Money, natural gas production has all but stopped:

Last April about half of the nation's 1,800 or so drilling rigs were looking for oil while half were looking for gas, according to IA. By this May over twice as many were looking for oil, and EIA has reported recent natural gas production numbers slightly below levels seen at the end of last year.

Which just goes to show, you can’t make projections from a single quarter.

And natural gas might not be the environmentally clean fuel we think. Even if we set aside the issue of fracking, there’s still the issue of methane. Natural gas is almost entirely methane. Because of the enormous pressure that’s involved at every stage of getting natural gas to a power plant, leaks are greater than for other forms of fuel. But the EIA did not report methane at all, so we did not get a realistic comparison of Greenhouse Gas (GHG) emissions by source.

And methane produces even more pernicious GHG than CO2. According to a study released last year from Cornell University’s Robert Horwath, “Compared to coal, the (greenhouse gas) footprint of shale gas is at least 20% greater and perhaps more than twice as great on the 20-year horizon.”

Of course, Horwath’s predictions have been challenged. Bill Chameides, Dean of Duke’s Nicholas School of the Environment, lays out the arguments. But regardless of the seepage rate, methane will be released into the environment.

And the damage methane will do might not be reversible. To quote Chameides, “If fragile ecosystems like coral reefs are decimated by a decade or two of extra methane-induced warming, can we be sure that they will recover once the methane is flushed from the atmosphere? Probably not.”

Whichever way you look at the EIA data, it’s not the whole story. The 18% drop in coal emissions looks like a home run until you dig deeper. We may be closing coal plants, but the reduction in CO2 may be due more to what the EIA called secondary factors like weather and renewables than a switch to natural gas. In any case, methane emissions should be measured and reported side by side with CO2.

But am I splitting hairs here? Carbon emissions are dropping, and not just across power plants. Transportation and other petroleum uses dropped as well. All in all, Q1 2012 emissions fell an astonishing 8%. That’s more than can be accounted for by warmer weather. And that’s a trend in CO2 worth reporting.

Carol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 5,000 companies worldwide. Carol holds degrees from Smith College and Harvard University.